(Yicai) Aug. 5 -- Chinese optical communications stocks slumped after reports said the US Federal Communications Commission is considering curbing imports of new models of China-made data center components, though analysts noted that seven of the world's top 10 optical module makers are Chinese, making a total import ban unlikely.

Shares of Zhongji Innolight [SHE: 300308], the world's largest producer of optical transceivers and interconnect solutions, plunged nearly 14 percent in Shenzhen today before closing 7.3 percent lower at CNY947.74 (USD140.47) each. Eoptolink Technology [SHE: 300502] tumbled more than 10 percent intraday and finished 5.3 percent lower, while TFC Optical Communication [SHE: 300394] sank nearly 9 percent before rebounding to end 2.3 percent higher.

Representatives for Innolight and Eoptolink told Yicai that the firms are aware of the reports, but declined to comment because the FCC has not yet issued any restrictions affecting the sector. A spokesperson for TFC Optical, which makes components for optical modules, said that if a ban were to materialize, the impact would likely be felt more directly by module-producing clients.

The stock selloff reflects investor concerns about the sector, although analysts said the global nature of the optical communications supply chain makes sweeping restrictions difficult to implement.

Industry insiders told Yicai that similar reports have emerged multiple times in recent years and should not be overinterpreted. They added that companies across the industry have spent the past five or six years preparing for geopolitical risks, leaving them better positioned to respond should new US regulations eventually take effect.

The sources said US AI infrastructure remains heavily dependent on Chinese optical modules, and US manufacturers lack sufficient production capacity and trail in some key technologies.

They also pointed to previous trade measures as evidence that a blanket ban is unlikely. After additional tariffs were imposed last year, optical modules were among the first products added to the tariff exemption list following opposition from US cloud service providers. As a result, they expect any future restrictions to include exemptions.

In a recent note, researchers at Guotai Haitong Securities said the optical communications industry is one of the world's earliest and most globalized technology sectors, making it heavily dependent on international supply chains.

The brokerage said the global optical communications ecosystem benefits not only Chinese companies but also major US chip and component suppliers, while cloud service providers rely on optical communications products to support data center expansion. Blanket restrictions would therefore hurt the global industry, making the likelihood of such measures "close to zero."

The report added that both North American cloud providers and Chinese optical module and component manufacturers began preparing for geopolitical risks five or six years ago and have contingency plans in place should new regulations ultimately be introduced.

Editor: Emmi Laine